Identifier
Created
Classification
Origin
08ISLAMABAD2465
2008-07-22 12:12:00
UNCLASSIFIED
Embassy Islamabad
Cable title:  

PAKISTAN'S 2008-2009 TRADE POLICY

Tags:  ETRD ECON EINV PK 
pdf how-to read a cable
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ZNR UUUUU ZZH
R 221212Z JUL 08
FM AMEMBASSY ISLAMABAD
TO RUEHC/SECSTATE WASHDC 7888
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEHNE/AMEMBASSY NEW DELHI 3549
RUEHKA/AMEMBASSY DHAKA 2271
RUEHLM/AMEMBASSY COLOMBO 1506
RUEHLO/AMEMBASSY LONDON 8331
RUEHML/AMEMBASSY MANILA 3002
RUEHKP/AMCONSUL KARACHI 0060
RUEHLH/AMCONSUL LAHORE 5804
RUEHPW/AMCONSUL PESHAWAR 4583
UNCLAS SECTION 01 OF 02 ISLAMABAD 002465 

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON EINV PK
SUBJECT: PAKISTAN'S 2008-2009 TRADE POLICY

Summary
- - - -

UNCLAS SECTION 01 OF 02 ISLAMABAD 002465

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON EINV PK
SUBJECT: PAKISTAN'S 2008-2009 TRADE POLICY

Summary
- - - -


1. (U) The Prime Minister announced Pakistan's 2008-09 Trade Policy
on July 19. The policy sets an export target of USD 22.1 billion
and a target growth rate of 15 percent. It expands the import items
list from India with a view to decreasing the cost of raw materials
and manufacturing inputs. Pharmaceuticals, horticulture, gems and
jewelry, and halal food are set to benefit from increased subsidies
and promotion, but notable was the lack of significant concessions
for the textile industry. The government also proposed reactivating
the Trade Export Promotion Board and revamping the Trade Development
Authority of Pakistan. The policy appears to lack strategic focus
or direction, and trade and industry leaders have criticized it as
lacking adequate business-friendly measures to help in promoting
trade. End Summary.

Challenges and Goals
- - - - - - - - - - -


2. (U) In his speech outlining the 2008-09 Trade Policy, the Prime
Minister emphasized the challenges facing Pakistan's export
industries. These challenges were both internal, involving
political and security problems as well as power shortages, and
external: the high price of oil, tariff and non-tariff trade
barriers, the rising cost of raw materials, and increasing
competition in international markets. The statement made a pointed
reference to visa policies and negative travel advisories of other
countries that discourage business travel both into and out of
Pakistan. For the coming year, the government's goals for trade
will focus on export diversification, measures to increase
competitiveness, and more effective trade promotion. The GOP has
set an export target of USD 22.1 billion, with a export growth
target of 15 percent, the same rate that was achieved in FY2007-08.


Imports from India
- - - - - - - - - -


3. (U) The new policy features an expanded list of 136 items that
are permitted for import from India, including chemicals, raw
materials and manufacturing inputs, machinery and parts,
pharmaceuticals, and fertilizer. Among the new items are
scientific, academic, and reference books, as well as diesel and
fuel oil used for electricity generation or the manufacturing
process. Other input items, such as stainless steel and yarn, which
previously could only be imported by train, can now be imported by

truck via the Wagah border. According to the statement, the cheaper
cost of Indian goods, particularly less transportation cost, would
help to make Pakistani goods produced with these inputs more cost
competitive internationally.

Export Diversification
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4. (U) The policy statement lists export diversification as part of
the export strategy. Among the diversification measures are
incentives and concessions for pharmaceuticals, which will benefit
from an accelerated plant depreciation allowance of 90 percent in
the first year. The policy also names horticulture as an export
industry and will allow it to benefit from a variety of tax credits.
Gold, silver, platinum, palladium, diamonds, and other precious
stones will be exempt from customs duties and sales tax. A Halal
Certification Board will be established under the Ministry of
Science and Technology in order to enforce halal food standards and
create certification mechanisms for the export of halal food
products.

Increasing Competitiveness
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5. (U) Additional competitiveness measures are focused on increasing
government support for exporters. The trade policy calls for
reactivation of the Pakistan Export Promotion Board (PEPB),which
was originally established in 1963 and replaced by the Trade
Development Authority of Pakistan (TDAP) in 2006. The reconstituted
PEPB, chaired by the Prime Minister, will focus on more effective
GOP agency coordination on trade issues. The policy also seeks to
make TDAP more effective by restructuring the organization so as to
make it more responsive to exporters' needs. TDAP is also tasked to
open an office in the Federally Administered Northern Areas in order
to "realize the full export potential of Northern Areas."

ISLAMABAD 00002465 002 OF 002



Comment
--------------


6. (U) The 2008-09 Trade Policy seems to be primarily a collection
of edits to the customs and excise duty schemes. Trade and industry
leaders have been very critical of the new policy in the press,
saying it does not give clear direction to trade promotion and that
it is deficient in business friendly policies. The textile sector,
which produces 57 percent of Pakistan's export goods annually, is
conspicuously absent, although there has been some press speculation
that a textiles subsidy package will be announced at a later date.
Other than tasking the Ministry of Health to draw up a proposal for
creation of bio-availability and bio-equivalency laboratories in
support of the pharmaceutical industry, support for research and
development is also absent from the policy. A common complaint in
the business community has been that due to trade restrictions,
there is insufficient access to cheaper Indian goods that could help
reduce production costs, and the policy is commendable in proposing
greater trade with India. However, overall, the policy seems to do
nothing more than tinker with customs duties and tax credit schemes
rather than provide a comprehensive strategy to achieve Pakistan's
trade goals. End comment.

PATTERSON